Digital detection spells jail time for insurance scammers
The Insurance Crime Bureau estimates that in 2019 up to 20% of the R35 billion
paid out on short term insurance claims could have been fraudulent. If correct this
means that in 2019 alone the South African short-term insurance industry lost
almost R7 billion to fraud.
The unprecedented financial pressure that consumers are under in 2020,
“has certainly increased the frequency and quantum of the fraudulent insurance
claims that we’ve picked up to date,” says Christelle Colman, insurance Expert
at Old Mutual Insure. In response, the short-term industry is currently on,
“high alert for fraud as Covid-19 financial pressures bite,” she adds.
Insurance fraud harms others
Increased financial pressure aside, Colman reports that, many South Africans
don’t actually consider gilding the lily on their insurance claims to be a
crime. “Many people consider insurance fraud a relatively benign practice that
doesn’t harm anyone,” says Colman. Nothing could be further from the truth.
Insurance works on the principle that the many contribute to making good the
losses of the few. Money lost to the pot by insurance fraud, says Colman,
“compromises the ability of insurers to indemnify – or make good – the claims
of those who have loyally paid their premiums for years and genuinely suffered
loss.”
Where fraud is widespread, insurers will also almost certainly increase
premiums and excesses in an attempt to rectify loss-making portfolios.
False Claims
Insurance fraud can be subtle and insidious. It’s not always about a false or
fictious claim. Often people find themselves committing insurance fraud almost
unwittingly. For example, people often lie about the detail of the claim,
adding a few items that weren’t lost - or increasing the quantum of claims by
exaggerating the value of articles lost. Another commonplace behavior is to
increase the value of the claim to compensate for the excess. “While many
consumers believe this is allowed, it is in fact blatant fraud,” explains
Colman. This is why it is important to keep proof of ownership of items as well
as the values that you paid for them. It is equally important to keep your
insurer up to date and informed when values or other details of cover change.
Accidental Fraud
A common area where people inadvertently fall into committing insurance fraud
is when something is stolen or lost, claimed for and paid out – and then the
wedding ring is found or the stolen car retrieved a few months later. “Do not
just hang on to the returned car or ring,” warns Colman. Since the policy
holder had been indemnified – that is, paid out – the lost ring or car now
belongs to the insurer. Policy holders who get indemnified goods back should
immediately alert their insurer and hand over the goods or they will be
committing fraud. The insurer will, in all likelihood, sell the goods to offset
the settlement.
If the item is of sentimental value – like your original wedding ring –
the insurer will, most likely, give you the opportunity to return the payout
that you received for the original loss of the ring. This will, “allow you to
keep your original ring while also preventing you from committing fraud,” says
Colman.
Insurers see more than you think
The point is that insurers have systems and known behaviours - or ‘tells’ -
that pick-up inconsistencies, indicating when insurance fraud is likely in
play. Right from the start, for example, says Colman, “the initial call is
recorded.” Not only is the level of nervousness of the caller often a tell, but
when the detail of what they say on the first call doesn’t stack up with what
is finally submitted in the claim, “we know to dig a little deeper,” she adds.
In a digital age informed by data, insurers are also able to cross-check
all the information that they have on individuals with, for example, their
social media profiles – and even their mobile phone and WhatsApp messages when
access to these is permitted as part of an official investigation. This builds
a very precise picture of where people were, what they were doing, who they
were talking with and what they were saying. “If this throws up inconsistencies
with the details of their claim and other statements, then we’re on to
something,” says Colman.
It doesn’t’ even need to be that sophisticated. Motor vehicle accident
or loss claims between 11 pm and 4 am, for example, are always scrutinized as
this is when, “people are socializing, might be drinking and are driving in the
dark,” explains Colman.
Insurance Fraud Syndicates
While individual fraud is fairly easy to detect, in recent years insurers have
had to deal with professional insurance fraud syndicates. Syndicates target
insurers with well-coordinated and executed fraud strategies. For example,
media reports have recently highlighted a crime syndicate targeting luxury car
owners. Typically, the syndicate calls vehicle owners, pretending to be the
vehicles’ manufacturers.
The well-rehearsed caller then arranges to send a tow truck to pick up
the vehicle to repair a manufacturing fault that they had ‘just discovered in
all their vehicles’. Owners who hand over their vehicles in good faith never
see them again. Most of these cases involve, “someone inside one of these
companies able to provide the detail that makes claims look real so as to make
criminal or fraudulent behaviour look genuine,” says Colman.
Insurance Crime Bureau
In addition to insurer’s internal forensic and investigative systems, the
Insurance Crime Bureau (ICB) is a voluntary organisation that insurers provide
with data. The ICB is a powerhouse of information on individuals, organisations
and practices associated with or involved in fraud. The ICB also provides a
platform for the public to safely and anonymously report fraudulent activities
or suspected insurance crimes via a toll-free insurance fraud line. While the
main focus of the ICB is organised fraud and crime, the bureau also
investigates individual repeat offenders and fraudsters targeting insurance
companies.
Their aim is not to replace the internal fraud investigation units of
the insurance companies, but to understand syndicated and general fraud committed
across the industry affecting multiple companies. Either way, consumers should
understand that, “insurers collaborate with each other through organisations
such as the ICB to combat fraud in the industry on a holistic basis,” she adds.
Fraud is a crime
Whether sophisticated multi-million Rand crimes or smaller individual frauds
involving people padding their claim or inadvertently increasing the value of
claims, the point is there are systems in place to spot fraud. Fraud is also a
crime. In addition to not being paid out, “insurers frequently institute
criminal claims again policy holders. These regularly end in substantial fines
or even jail terms,” warns Colman.
If policy holders believe they have a legitimate claim and their insurer is not
being fair they should approach the insurance Ombudsman. This is an easy online
process providing relatively speedy resolution. “The Ombud actively intervenes
on behalf of customers in cases where customers have not been treated fairly by
their insurer, “advises Colman.
Honesty the best policy
The best policy to avoid insurance fraud remains total – and continual –
disclosure. Share as much information and detail as possible and inform
insurers as conditions, contents, values or any other details change.
Insurance, like all relationships, is built on trust. Trust is founded on clear
and consistent communication and constant disclosure. “Honesty is also the best
way to avoid insurance fraud,” concludes Colman.
Article written by Christelle Colman, Insurance Expert
at Old Mutual Insure
Featured in FANews